Furman Center Goes Inside the Housing Crisis

Only three weeks after Shaun Donovan was sworn in as the 15th U.S. Secretary of Housing and Urban Development, he came to Vanderbilt Hall to deliver a major policy address outlining the Obama administration’s ambitious plans for responding to the housing crisis. “It’s a little early for me to be speaking out,” acknowledged Donovan, the keynote speaker at the Furman Center for Real Estate and Urban Policy’s February housing policy conference. “No speechwriter, no assistant secretary. It’s a little bit of a risk for me, doing this today.” But, he added, NYU was “the only place” he’d want to give his first policy speech.

In fact, Donovan has a long-standing relationship with the Furman Center, a joint research center of the Law School and the Robert F. Wagner Graduate School of Public Service. After serving as a deputy assistant secretary for HUD during the Clinton administration, Donovan was a Furman Center visiting fellow in 2001-02, studying ways to preserve federally assisted housing. Subsequently, as New York City Housing Preservation and Development commissioner, he relied on Furman Center research about the New York City real estate market to inform policy decisions. More recently, center co-director Ingrid Gould Ellen, associate professor of public policy and urban planning at the Wagner School, served during the Obama transition as a member of HUD’s agency review team, and remained a policy adviser for a few months after the inauguration while Secretary Donovan put his team in place.

Donovan began his speech at the Furman Center’s conference, “A Crisis Is a Terrible Thing to Waste: Transforming America’s Housing Policy,” by citing “terrifying” statistics: 2.2 million foreclosures in 2008, and in December alone 45 percent of home sales were foreclosures or short sales. Donovan then vowed that one of HUD’s top priorities would be to step up the loan modification process. (A few days later, President Obama announced an aggressive plan to help up to nine million homeowners by providing billions in funds to Fannie Mae and Freddie Mac and offering financial incentives for lenders to reduce mortgage rates.)

Donovan’s speech—in which he also revealed his long-term goals for HUD—generated a flurry of news coverage from outlets such as CNBC, the New York Times, and the Wall Street Journal. Many reporters noted Donovan’s announcement that HUD would, for the first time, focus on sustainability issues, striving to make public housing a model of energy efficiency. Residential housing accounts for 28 percent of greenhouse gas emissions in the United States, and as many as one in 10 households resides in buildings that are in some way connected to HUD, Donovan said: “We can catalyze an enormous change in the way that housing gets built and renovated.” He announced the creation of the Office of Sustainability, to be run by Ron Sims, Washington State’s King County executive. Sims has a national reputation for his environmental stewardship and was unanimously confirmed as deputy secretary of HUD by the U.S. Senate in May.

Also noteworthy was Donovan’s pledge to make fair housing part of HUD’s mission. A 2007 Furman Center analysis found that the 10 New York City neighborhoods with the highest rates of subprime mortgages had black and Hispanic majorities, while the 10 areas with the lowest rates were composed largely of non-Hispanic whites. “We have to ensure we never again have targeting of communities,” he said.

Funded by the Rockefeller Foundation and the MacArthur Foundation, the Furman Center’s conference also featured addresses as well as roundtable and panel discussions by economists, bankers, scholars, and policy makers. A talk about mortgage-backed securities (MBS) included Joseph Tracy, executive vice president of the Federal Reserve Bank of New York; Austan Goolsbee, member of the Council of Economic Advisers and staff director of the Obama administration’s Economic Rec overy Advisory Board; Lawrence White, Arthur E. Imperatore Professor of Economics at NYU; and Lewis Ranieri, chairman of Ranieri Partners, a private investment advisory firm. Described as an inventor of MBS, Ranieri introduced himself as “Dr. Frankenstein” and engaged in a spirited discussion with the panelists on how MBS—initially a boon to homeownership—became a curse, causing the housing bubble that wreaked havoc on the U.S. economy. Some of the panelists argued that to avoid future subprime messes, mortgage originators should be required to “have skin in the game” and retain some of the risk of loan defaults.

Each session was designed to generate candid discussion about the challenges and opportunities of the current crisis, and to end with specific policy recommendations for moving forward. At press time, the center was working on a summary white paper to deliver to the Obama administration.

“The conference helped the Furman Center move outside of its sometimes New York–centric research to more explicitly engage in federal policy debates,” said Vicki Been ’83, director of the Furman Center and Boxer Family Professor of Law, a few months after the event concluded. “The center has remained a critical part of this discussion and will continue to take on research with national policy implications.”